05/07/2008

Futures analysis

The market does not show any signs of pulling back yet. If you look at the daily chart, you will see that the futures have gained so much momentum, that they cannot manage to reach even the shortest of moving averages (10- and 20-day periods). If you look at the intraday chart, you will see, that there are only side corrections, which do not show any buying evidence. The market continues to get weaker and weaker, until it probably reaches our main downside target, which lies near 2450 (May 2006 low). Basically, global stock markets managed to pass through short term earnings period, which were not actually that bad, but now comes the time for macroeconomics again. We had U.S. Labor Department announcements on Thursday, which indicated, that american economy is actually more important, than interest rates movement in Europe or even the far east. Next week will bring more news, this time about another currency-moving factor - Trade Balance. This is coming out on 11th of July and will determine intermediate term sentiment in global markets.

Three last sessions were rather volatile, as a result of macroeconomical announcements, that came along with exploration of new lows in the futures market. The futures are constantly bouncing on and off only intraday highs and lows, which shows, that there is not really any point of high significance on the way to 2450, where the price could stop for longer period of time. Sideway action is the only thing, that could happen throughout the last couple of weeks and this does not sound very optimistic. As for short term market sentiment, I would expect a neutral/bearish action on Monday. The States did not trade on Friday, because of Independence Day and did not show any strong buying evidence back then, so it would be another 'holiday effect', which happens almost every time. As for WIG20 futures, they closed near the most important of intraday areas - 2517, which will act as another last resort support here on Monday. Below that, there is only Thursday's bull trap support around 2510, which may hold a little. After this level is broken, there will be only 50 points to the long term support zone of 2450, where you could look for a potential short term bottom.